China fights inflation with Christmas rate rise

BEIJING: China's central bank raised interest rates on Saturday, Dec 25 for the second time in just over two months as it stepped up its battle to rein in stubbornly high inflation.

The People's Bank of China said it will raise the benchmark lending rate by 25 basis points to 5.81 percent and lift the benchmark deposit rate by 25 basis points to 2.75 percent.

The central bank said in a statement on its website (www.pbc.gov.cn) that the latest rate rise would take effect on Sunday.

The move came after Beijing said earlier in December it was switching to a "prudent" monetary policy, from its earlier "moderately loose" stance.

Analysts said the change of wording, along with a recent pledge by top leaders to make inflation fighting a top priority for 2011, could pave the way for more interest rate increases and lending controls.

"This rate hike demonstrates Chinese authorities' determination to keep inflation under control up front, or front-loaded tightening," said Qing Wang, chief China economist at Morgan Stanley in Hong Kong.

"Compared to rate hikes in the beginning of next year, a rate hike before year-end will have a more tightening impact, as the interest rates on the medium- and long-term loans and deposits are reset at the beginning of each year according to the base rates."

The central bank said on Friday it will deploy a range of policy tools to head off inflationary pressures and asset bubbles.

To tame price pressures, China raised interest rates on Oct 19 for the first time in nearly three years. The consensus of analysts polled by Reuters this month was for three rate rises of 25 basis points each by the end of next year.

Along with playing a key role in the fight against inflation, policy tightening also signals the government's confidence that the world's second-largest economy is on solid ground, even as the U.S. and European recoveries remain fragile.

CHRISTMAS SURPRISE

While almost all investors and analysts thought more policy tightening was coming, there was uncertainty about whether the central bank would raise rates before the end of the year.

The central bank opted to raise banks' reserve requirements on Nov 19 ahead of data which showed inflation hit a 28-month high of 5.1 percent.

"We expected a rate hike by the end of the year, though Christmas Day is something of a surprise -- a rate hike is not normally on the wish-list for Santa Claus, but in China's case this is a prudent move," said Brian Jackson, economist with Royal Bank of Canada in Hong Kong.

"We think it is increasingly clear that using quantitative measures, such as reserve ratios, to rein in liquidity and credit has not been enough, and that adjusting the price of credit -- that is, interest rates -- is needed to get price pressures under control." - Reuters

China raises rates again, more to come

BEIJING: China's central bank raised interest rates on Saturday, Dec 25 for the second time in just over two months, underscoring concerns that inflation may be entrenched and swift action is needed to get price pressures under control.

The intensification of policy tightening also reflects the government's belief that the economy is fundamentally in a good shape.

Below are some implications what the latest move means for monetary policy outlook and financial markets.

CHRISTMAS SURPRISE

The rate rise shows China's top leaders have the task of taming inflation at the top of their agenda, as they had signaled in November, when they said they would intervene to control prices if needed.

Such language, alongside Beijing's official switch of its monetary policy to "prudent" from the previous "moderately loose" in early December, had laid market expectations for tighter policy.

But investors were not sure if the People's Bank of China (PBOC) would move this year given it only just raised banks' reserve requirements on Nov 19, ahead of data which showed inflation at a 28-month high of 5.1 percent.

The PBOC's Christmas Day rate rise is characteristic of its tendency to surprise investors with policy changes when they least expect it.

The move came amid tentative signs that price pressures were spreading beyond food and inflation and could be more stubborn than authorities had expected.

China's real interest rates are deep in negative territory. The one-year benchmark deposit rate is only 2.75 percent after the latest climb, well below November's inflation of 5.1 percent, highlighting the risk that price expectations may spin out of control.

All said, there have also been dovish signals from the government in recent days. Notably, it has raised its 2011 inflation target to 4 percent from this year's 3 percent.

RATE RISE CYCLE

Though announced by the central bank, the decision will have received approval from the highest echelons of power. Once a consensus has been forged in Beijing to raise or cut rates, past experience shows that moves often come in bunches.

This is the second rate rise in the current tightening cycle (the first was announced on October 19) and analysts think that another 50 bps of increases are on the way over the next year.

The PBOC made clear on Friday that it will deploy a range of policy tools to head off inflationary pressures and asset bubbles.

Interest rates are just one item in China's toolkit for mopping up the liquidity that is at the root of the country's inflation problem. Banks' reserve requirements and lending quotas are crude but effective shovels for removing cash from the economy as well.

So far, the PBOC has dragged its feet on jacking up rates, relying mainly on quantitative tightening measures, notably banks' reserve requirement ratio (RRR) and lending restrictions, which are less likely to dampen growth in the economy.

The PBOC has increased RRR six times this year but only lifted interest rates twice.

Some analysts thought China should have raised rates earlier in the year when the country was growing at a double-digit annual pace. But officials were worried at the time about sluggish external demand and uncertain about how the domestic economy would cope when government stimulus was withdrawn.

The view from Beijing now is that the economy has built up a momentum solid enough of its own and tightening is needed to keep it on a sustainable path of growth.

LIMITED MARKET IMPACT

Since the move was relatively mild, there could be a relief rally when the Chinese stock market opens on Monday.

After all, the market had already priced in more rate rises, with the main index in Shanghai down nearly 10 percent since mid-November.

Still, the specter of more tightening will hang over the market, limiting any gains. The government is determined to keep inflation under control, indicating there will be more tightening in the coming year.

The rate rise may suggest that the central bank is less concerned about hot money inflows, and is more willing to let the yuan appreciate at a faster pace and use the currency as another lever to rein in inflation.

In global markets, tighter Chinese policy could fuel investor concerns that growth in the world's second-biggest economy may falter, undermining stocks, commodities and high-yielding currencies.

But many analysts say China's resilient economy can withstand higher rates and they are a good thing for the country in the long run as they prevent the economy from overheating. - Reuters

#Stocks to watch:* Glove makers, Axiata, Sime Darby

KUAL A LUMPUR:'' The final trading week for the global stock markets that starts on Monday, Dec 27 could largely mirror last week as most investors stayed on the sidelines ahead of the Christmas holidays.

US markets were closed on Dec 24 for the Christmas holiday. Meanwhile, trading at the Nikkei 255 also saw a shorter week as Dec 23 was a Japanese national holiday to celebrate the Emperor's birthday.

Key Asian markets mostly closed in the red last Friday, including the FBM KLCI.

Market observers and analysts concluded that investors took a breather and were probably taking profit as they headed towards year-end.

On the local front, the FBM KLCI gained 11.7 points week-on-week last Friday and added RM9.88 billion for the market capitalisation to increase to RM1.27 trillion.

Year-to-date, the FBM KLCI has gained 18.76%.

Trading patterns on Bursa Malaysia over the past few weeks have generally been in line with regional markets, as lack of fresh leads and a slowdown in corporate news have kept investors seemingly reluctant to take positions now.

Among the stocks to watch on Monday are glove makers, in particular ADVENTA BHD [], which earlier last week had hit up on market speculation that it could be a potential acquisition target by a US-based firm.

However, Adventa had announced that while it periodically receives expressions of interest on an exploratory basis from other parties in relation to possible acquisitions of the company but that there had been no material change in circumstances.

Last week, shares of other glove makers also rallied on this news.

Axiata could be in focus after OSK Research said the telco may dispose its 49% stake in Iran's Mobile Telecommunications Company of Esfahan (MTCE), a small mobile operator it acquired in 2005.

Axiata management, however, had stated it was in no hurry to dispose non-core assets until the right price was secured, said the research house.

The telco had last Thursday completed the sale of its entire stake of 18.9% in Samart Corporation Public Company Ltd.

Sime Darby filed a second civil suit last Friday against ex-president and group chief executive Datuk Seri Ahmad Zubir Murshid and two other former executives for breach of trust and fiduciary duty.

The suit seeks damages for at least RM92.2 million, interest and costs to be paid by the defendants for breach of trust and fiduciary duty in the Bakun project.

Meanwhile, K&N Kenanga Bhd said additional impairments of RM44.3 million would be reflected in the financial results of its wholly owned subsidiary Kenanga Investment Bank Bhd in the fourth quarter.

It said the impairments stem from write-downs in collateral values relating to a loan and an investment in an associate company.

Sime Darby files suit against ex-CEO and two others over Bakun project

KUALA LUMPUR: ''Sime Darby filed a second civil suit today against former president and group chief executive Datuk Seri Ahmad Zubir Murshid and two other ex-executives for breach of trust and fiduciary duty.

The suit, filed at the New Commercial Court registry through Messrs Zaid & Co, seeks damages for at least RM92.2 million, interest and costs to be paid by the defendants for breach of trust and fiduciary duty in the Bakun project.

In the suit SIME DARBY BHD [] and its three subsidiaries, Sime Engineering Sdn Bhd, Sime Darby Holdings Berhad and Sime Darby Energy Sdn Bhd, named Datuk Seri Ahmad Zubir @ Ahmad Zubir Murshid, Datuk Mohamad Shukri Baharom (former executive vice president of the group's energy & utilities division) and Abdul Rahim Ismail (former chief financial officer of the group's energy & utilities division) as defendants.

The group wants an order from court that Ahmad Zubir, Mohamad Shukri and Abdul Rahim make restitution of RM74 million and RM16.5 for wrongful pay-out in the Bakun project, and an order that Mohamad Shukri and Ahmad Rahim each make restitution of RM851,313.49.

The group also seeks an order that damages be assessed and paid by each of the three defendants for wrongfully giving away plants to Sinohydro in the Bakun project, and an order that damages to be assessed for all losses caused by the defendants and suffered by the plaintiffs in the Bakun project.

The plaintiffs want an order that the defendants pay the damages on the basis that each of the defendants acted in breach of trust and fiduciary duty, interest and costs, deemed fit by the court.

The Bakun Dam project at Sungai Balui, Sungai Rejang, Sarawak, is the largest hydropower project in Malaysia, with a proposed capacity of 2,400 megawatts'' of electricity once completed. The dam was to be built in 1994 and expected to be completed by December 2010.

According to the suit, the Sime darby board of directors had by September 2007 become aware of cost over-runs in four projects, including Bakun.

Yesterday, Sime Darby Bhd, Sime Engineering Sdn Bhd, Sime Darby Energy Sdn Bhd, Sime Darby Marine Sdn Bhd and Sime Darby Marine (Hong Kong) Sdn Bhd filed a civil suit against Ahmad Zubir, Mohamad Shukri, Abdul Rahim,'' Abdul Kadir Alias (former head of the oil & gas business unit of energy & utilities division) and Mohd Zaki Othman (former senior general manager of Sime Darby Engineering Sdn Bhd) for restitution of at least RM338mil, plus general and aggravated damages and other relief.

In a statement to Bursa Malaysia on Thursday, the conglomerate said the suit was related to its loss-making Qatar Petroleum, Maersk Oil Qatar and marine projects.

The High Court has set March 9 next year for case management before the High Court Senior Assistant Registrar Khairuddin Anhar Mahmud. ' Bernama

K&N Kenanga to focus on main profitable businesses next year

KUALA LUMPUR: K & N Kenanga Holdings Bhd (K&N Kenanga) will focus on its main profitable businesses namely equity broking, corporate advisory, treasury, fixed income, asset management and futures trading going forward.

These activities have proven their profitability in the past and will spearhead the Group's activities, it said.

It said wholly owned subsidiary Kenanga Investment Bank Berhad (KIBB) in its own stead ould concentrate on expanding its retail and institutional client business by expanding its global trading capabilities, offering more extensive research coverage and upgrading its IT infrastructure and system

'These underlying businesses continue to record positive growth and profits but their achievements have been overshadowed by the recent impairments.

'Going forward, the group intends to capitalise on its strengths and ensure sustainable profitable growth,' said K&N Kenanga in a statement Friday, Dec 24.

It said the additional impairments of RM44.3 million that would be reflected in the financial results of KIBB in the fourth quarter stem from write-downs in collateral values relating to a loan and an investment in an associate company.

It said while the impairments would reflect negatively on the group's profit and loss figures, its operating profits for the 9 months period ended 30 September 2010, excluding the impairment figures,'' remained positive and healthy at RM40.4 million against RM26.9 million for the same corresponding period in 2009.

The pre-impairment operating profits for the group represent a growth of 50.2%, it said.

K&N Kenanga said the bank, being the main contributor towards the profitability and growth of the Group, recorded for the same period, pre-impairment operating profits of RM32.4 million for 2010 against RM20.2 million for the previous year, representing a growth of 60.3%.

It said the Risk Weighted Capital Ratio (RWCR), a key capital risk indicator to measure a bank's ability to absorb unexpected loss, would improve marginally from 37.45% as at Sept 30, 2010 to approximately 37.93% after the RM40 million capital injection and impairment provisions, which is considered a healthy and strong ratio in relation to the bank's asset profile.

As part of the process to strengthen its capital management, the bank had on Nov 1, 2010 increased its issued and paid-up capital by an additional RM40 million, from RM580 million to RM620 million, it said.

Accordingly, the bank group's capital base, based on the position as at Sept 30, 2010 increased from RM578 million to RM618 million, it said.

'Continuing its focus on maintaining a highly liquid position, its liquid-asset ratio increased to 84.6% as at end-September 2010 through significant holdings of short term funds and government securities.

'This liquid asset ratio remains unaffected by the impairments and indicates a strong liquidity buffer vis-''-vis industry standards, and is in line with the Bank's effort to adopt a prudent and dynamic approach in its liquidity risk management,' it said.

Shares close lower ahead of Christmas break

KUALA LUMPUR: Share prices on Bursa Malaysia ended trade easier on Friday, Dec 24 on further profit taking while some investors were already away for the Christmas break, dealers said.

However, the losses were limited as mild window dressing activities in some bluechips managed to keep FTSE Bursa Malaysia KLCI (FBM KLCI) above the 1,500 level, they said.

At 5pm, the FBM KLCI slipped 2.9 points to 1,511.58.

The benchmark index which opened 1.57 points higher at 1,516.05, moved between 1,510.7 and 1,516.44.

The Finance Index dropped 42.62 points to 13,797.39 while the PLANTATION [] Index rose 27.74 points to 7,948.21 and the INDUSTRIAL INDEX [] added 2.36 points to 2,818.39.

The FBM Emas Index slipped 20.36 points to 10,328.05, the FBM 70 Index was 21.641 points lower at 10,855.09 and the FBM Ace Index eased 9.09 points lower at 4,254.13.

Decliners led advancers by 396 to 296, while 327 counters were unchanged, 372 untraded and 33 others suspended.

Total volume dropped to 835.211 million shares worth RM904.809 million from Thursday's closing turnover of 1.251 billion shares valued at RM1.646 billion. ' Bernama

Wal-Mart invests in Chinese e-commerce firm

SHANGHAI: ''Wal-Mart Stores Inc, the world's largest retailer, has invested in China's top online seller of consumer electronics and communication products, in a push to extend its reach to more Chinese buyers.

Chinese online business-to-consumer (B2C) company 360buy Jingdong Mall secured US$500 million in funding from six strategic partners, including Wal-Mart, a 360buy spokeswoman said on Friday.

Wal-Mart's investment amount was not disclosed but the company has been eager to tap into the pocketbooks of China's burgeoning middle class, and earlier this year launched in China an e-commerce site for its Sam's Club warehouse stores.

"It's a smart move for them (Wal-Mart), because 360buy, in my opinion, is one of the best B2C online companies in China today," said Michael Clendenin, managing director of RedTechAdvisors, a TECHNOLOGY [] research firm.

360buy chief executive Liu Qiangdong told a press conference on Thursday that the funds would be used to build logistics centres in China, local media reported.

China's massive e-commerce market is highly fragmented and competitive, where 360buy battles Taobao, a unit of Alibaba Group and E-Commerce China Dangdang Inc for dominance. 360buy had 14.1 percent of China's B2C market in the third quarter while Dangdang had 3.7%, according to data from Analysys International. ' Reuters

Emerging market funds on the way to record-setting year-EPFR

KUALA LUMPUR: Emerging markets are on their way to report record inflows in 2010 with equity fund inflows so far reaching $92.5 billion, $10.5 billion above last year's and bond funds attracting $52.5 billion, nearly seven times 2009 total, fund tracker EPFR Global said on Friday, Dec 24.

The totals were up to the week ending Dec. 22.

For the week's performance however, emerging market equity funds saw their 29-week inflow streak snapped due to profit-taking and uncertainty about inflation and fresh capital controls, said Boston-based EPFR, a unit of Informat Plc

Overall, EPFR said that during the final weeks of 2010, investor focus has shifted from bonds to equities. As such, equity funds globally took in a net $4.5 billion for the week ending Dec. 22 while bond funds saw redemptions totalling $2.3 billion.

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EMERGING MARKET EQUITY FUNDS

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EPFR said global emerging market equity funds have attracted two out of every three dollars committed to emerging market funds this year, but that it was the EMEA equity funds that would be carrying the greatest momentum into 2011 as they have seen inflows for 15 straight weeks with half of their year-to-date total coming in the fourth quarter alone.

Latin American Equity funds have stumbled in recent weeks as political uncertainty and worries about Chinese demand cooled investor sentiment toward the region.

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U.S., GLOBAL, EUROPE, PACIFIC AND JAPAN EQUITY FUNDS

U.S. and Japan equity funds saw inflows with three of the other developed market fund groups seeing outflows. The latest inflows to the United States reduced year-to-date redemptions to $34.2 billion, which would be the smallest annual outflow since 2006.

Japan equity funds extended their inflow streak to four consecutive weeks while Europe equity funds turned negative despite continued inflows into Germany equity funds.

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SECTOR FUNDS

Commodity and energy sector funds continued their strong run this year. Financial sector funds however struggle with concerns about higher funding costs in the coming months and the perception that Europe's sovereign debt problems could further damage balance sheets.

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BOND FUNDS

U.S. bond funds and western Europe bond funds saw outflows offsetting the gains in global bond funds and emerging markets bond funds.

In the case of U.S. bond funds, redemptions from municipal bond funds accounted for more than half of the total outflows while in western Europe, concerns about the ability of peripheral euro zone countries to avoid default continued to have an impact. - Reuters

Ringgit at 6-week high on IPO hopes, trading thin

SEOUL: The Malaysian ringgit hit a six-week high against the dollar on Friday, Dec 24 boosted by expectations an initial public offering of a local company will attract heavy foreign equity flows.

The gains were exaggerated by the thin liquidity before holidays, with currency markets in Indonesia and Philippines closed and trading volume not expected to pick up next week.

"Many players already took leave for the end of the year," said a Singapore-based dealer.

"Markets will be also very quiet next week as investors will ''prepare for the next year," he added.

RINGGIT

The ringgit rose 0.84 percent to as firm as 3.0890 per dollar, the strongest since Nov. 11 after a media report on the possible listing of Petronas Carigali.

Petronas Carigali Sdn Bhd, the exploration unit of Petroliam Nasional Bhd, may be listed on Bursa Malaysia next year and it is expected to attract a large number of foreign funds, Business Times said on its Web site.

"Its positive and provides a pull factor for foreigners into the local bourse and this is one of the drivers of the MYR for the MYR today," a trader in Kuala Lumpur said.

"But cyclically MYR has always ended the year on a strong note." If the IPO goes ahead it would be Malaysia's largest and could be around $48.3 billion, the report said.

YUAN

The yuan rose after the People's Bank of China set a five-week-high mid-point, continuing an upward crawl for the Chinese currency over the past few days.

The yuan may appreciate a little in the near term as the '''' central bank might use the exchange rate to fight potential '' imported inflation and as it needs to create a favourable environment for President Hu Jintao's visit to the United States in mid-January, traders said.

"During the Christmas and New Year holiday, we expect the spot yuan trade may move in a small range around the central bank's fixing," said a dealer at a Chinese bank in Shanghai.

The central bank set the day's mid-point at 6.6371, the highest level since Nov. 15 and up from Thursday's 6.6466.

Dealers said the yuan could appreciate 3 to 5 percent next year on a combination of political pressure and China needing to consider its own economic situation, such as inflation brought about through higher costs of imported goods and commodities.

WON

The won edged down against the dollar in thin trading on worries about geopolitical tensions after North Korea threatened a nuclear war.

But the local currency erased much of its earlier losses on demand from'' exporters such as shipbuilders.

Won/dollar spot trading volume fell to $3.97 billion, the lowest in 2010, according to data from Seoul Money Brokerage Services Ltd and Korea Money Broker Corp. - Reuters

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DPM: MAS and AirAsia must look at a win-win formula to compete globally

KUALA LUMPUR: Malaysia Airlines (MAS) and AirAsia must come up with a win-win formula to start on a strategic collaboration that will enable both the airline companies to compete at the global level.

Making this call, Deputy Prime Minister Tan Sri Muhyiddin Yassin said MAS and AirAsia would need to come together strategically even if they were two competing airlines especially in the area of low cost and average air fares.

Responding to a question from the media on the possibility of such a cooperation between MAS and AirAsia, Muhyiddin said it was up to the management and chief executive officers of both the companies to hold their discussions.

"This is because we understand that this would be a form of business and healthy business competition that we greatly encourage," he told a press conference following the launch of the "Teach for Malaysia" programme here on Friday, Dec 24.

"This is because I am aware that AirAsia is still not satisfied as several routes requested by them have yet to get the endorsement or cooperation from MAS, namely three main routes," he said.

Muhyiddin said he was confident that if these issues were discussed, the Malaysian airline companies would be able to move forward and more importantly be able to compete.

On the issue of nuclear development, he said no decision had been made and the programme was not something to be implemented in a hurry.

"We will gather the views of various parties as we realise that this is a new initiative and we might have to study even deeper based on the experiences of the countries that have successfully started such projects," he said.

Meanwhile, on the Teach for Malaysia programme, Muhyiddin said the programme was based on the concept of serving while teaching, a concept mooted by the "Teach for All" global network that gives the opportunity for outstanding graduates to serve the nation by teaching following their graduation.

Participants under the programme will be placed at challenging schools with a high demand for teachers beginning January 2012.

"We should take pride as Malaysia will be the first country in South East Asia and the third in Asia after India and China had successfully implemented this important initiative," he said.

Muhyiddin said the focus of the programme would be to provide high quality teachers to challenging schools and that it was also closely linked to the government policy to develop high quality human capital under the 10th Malaysia Plan. ' Bernama

Qatar Airways named best airline in the world for international travel

LOS ANGELES: For the second year in a row, Qatar Airways was named the winner of the World's Best Airline for International Travel, by readers of the US edition of Business Traveller magazine, Qatar News Agency reported Thursday, Dec 23.

The annual survey of more than 8,000 randomly selected Business Traveller subscribers, was asked to choose their favourite airlines, hotels, airports and other business travel service providers, in a total of 59 categories. ''

The survey consisted of open-ended questions, with no suggested company names or choices provided.

Proving that airlines in the Gulf are setting new standards for high-end service, Qatar Airways surpassed all other carriers in overall service and amenities.

"We are pleased to see that the business travellers across the globe are embracing our commitment to delivering the utmost in high service and standards," said Qatar Airways chief executive officer Akbar Al Baker.

"As we continue to grow our fleet and expand our routes to premier destinations throughout the world, we remain focused on delivering excellence to customers travelling in all cabin classes."

Qatar Airways is one of a select-few airlines with a Five Star Skytrax ranking for service and was recently elevated to the No 3 airline in the world in the 2010 passenger survey that involved a poll of over 200 international carriers.

Previous Business Traveller wins include the 2008 award for Best Airline in the Middle East and the 2007 award for Best Business Class in the World.

In celebration of this year's recognition, Qatar Airways joined the other Best in Business Travel winners at Business Traveller's annual awards gala dinner held in Los Angeles.

The event preceded the December/January issue of Business Traveller, in which all winners will be announced. Coverage of the gala will be published in the March 2011 issue.

As the global leader in luxury travel, Qatar Airways is undergoing aggressive growth with plans to serve 120 key business and leisure destinations worldwide with a fleet of 120 aircraft by 2013.

The airline currently operates a modern fleet of 93 aircraft from its Doha hub to 95 cities across Europe, Middle East, Africa, Asia Pacific, North and South America. ' Bernama

HK, Shanghai shares slip in light trade, autos slump

HONG KONG/SHANGHAI: - Hong Kong and China shares slipped on Friday, with trading most active in the auto sector, where investors dumped shares in a thin market on new restrictions on car sales in Beijing.

The Hang Seng Index ended down 0.3% at 22,833.8 in a shortened session to post a slight gain of 0.5% on the week after two successive weeks of declines.

Shanghai's key stock index fell 0.5% on Friday morning, dropping below the 250-day moving average, although most analysts said the index would be rangebound until the end of the year.

The Shanghai Composite is down 1.8% this week as a shortfall of funds in the financial system curbed the amount of cash available for stock trading. The money market is experiencing an acute squeeze after a series of official monetary tightening steps since mid-October.

News of Beijing's decision to limit car registrations to tackle traffic congestion in the capital prompted a selloff in auto stocks, although some analysts downplayed the move as a knee-jerk reaction.

In Shanghai, top auto producer SAIC Motor Corp Ltd and another major maker Chongqing Changan Automobile Co both dropped more than 1.5%.

In Hong Kong, Dongfeng Motor Group Co Ltd fell 7.9%, the sharpest drop in more than two years. Brilliance China Automotice Holdings Ltd, the sole distributor of Bayerische Motoren Werke AG (BMW) cars in China, fell 7.5% to a two-month low.

Brilliance China is up 147% this year.

"Sentiment is horrible and that's the problem," said Scott Laprise, an auto analyst at CLSA. "People sell their shares first and ask questions later."

Laprise said that while the overall impact would not be that big since Beijing accounted for about 5 percent of cars sold in China, investor appetite for auto shares had taken a hit.

Banking stocks outperformed, helping to limit losses, on expectations that the recent liquidity squeeze in China's money market may delay the central bank's next tightening steps, traders said.

All 16 banks listed on the Shanghai and Shenzhen stock exchanges rose, with China Everbright Bank Co Ltd, the most actively traded stock, jumping 5.7%, and Agricultural Bank of China Ltd, the second most active, rising 0.8%.



BEIJING TACKLES CONGESTION

The authorities will introduce a slew of measures, including limiting the quota for new small passenger vehicles to 20,000 per month in 2011 to ease the capital's chronic traffic gridlocks, the municipal government said on its website on Thursday.

"It's nothing more than local news. Its impact on nationwide car sales will be very limited," said Chen Shaodan, a senior analyst at China Development Bank Securities in Beijing. "The overall stock market is weak, not only the auto sector. People scrambling for money needed to sell some stocks and they made the auto news an easy excuse."

Still, the impact may extend beyond Beijing's limits as reflected by BMW shares in Germany closing down 1.7%, the top loser on Germany's benchmark DAX index, which closed down 0.1 percent on Thursday.

BMW, the world's biggest luxury car maker, has said it plans to ramp up capacity in China and is well ahead of achieving its full-year target for sales China.

Nomura estimates that BMW's joint venture with Brilliance achieves about 12.3% of its national sales volume in Beijing, citing data from China Auto Market.

In South Korea, Hyundai Motor Co, manufacturer of most of Beijing's taxis, fell 2.5%, dragging the KOSPI lower on the day. ' Reuters

BToto's potential privatisation essentially to collapse ownership structure

KUALA LUMPUR: OSK Research believes Berjaya Sports Toto's (BToto) potential privatisation is essentially aimed at collapsing the current ownership structure of the company.

It said via the exercise, Berjaya Corp Bhd can then have a larger direct stake in BToto, compared with its current indirect stake of only 25% via its 56.3% shareholding in Berjaya Land Corp Bhd (BLand), which in turns owns 45% of BToto.

The group announced on Thursday, Dec 23 that there have been preliminary discussions within the company on a possible corporate exercise which may result in the entry of a strategic investor.

While there has been initial contact with several potential strategic investors, no negotiations have been conducted with any strategic investor at this juncture as internal discussions and planning were still ongoing.

"We postulate that BToto can take a route similar to that for the privatisation of Magnum in 2007 via a selective capital reduction and repayment mode.

"And finally, a special purpose vehicle (SPV) that will be jointly owned by Berjaya and a new strategic investor will acquire the assets and liabilities of BToto once the privatisation is completed," OSK said in a statement on Friday.

The research house said the possible mode of the corporate exercise could be via a bonus issue, selective capital reduction, selective capital repayment and disposal of BToto to a SPV.

It maintains a "buy" call for the group at a target price of RM4.65. ' Bernama

Axiata may dispose 49% stake in Iran's MCTE

KUALA LUMPUR: Axiata Group Bhd may dispose its 49% stake in Iran's Mobile Telecommunications Company of Esfahan (MTCE), a small mobile operator it acquired in 2005.

The management, however, had previously said that it was in no hurry to dispose non-core assets until the right price was secured, said OSK Research.

On Thursday, Axiata announced that it completed the sale of its entire stake of 18.9% in Samart Corporation Public Company Ltd to existing shareholders, Charoenrath Vilailuck and Watchai Vilailuck, for RM108 million.

Axiata still holds its 24.4% stake in Samart i-Mobile, focusing on mobile, multimedia and international business, it said.

OSK Research, in its report, said the sale was in line with Axiata's focus to hive off non core assets and represents its second major disposal after the sale of an 89% stake in Multinet in July for US$15 million (RM46.46 million).

A check at Axiata's website revealed that MTCE commenced operations on June 24, 2002 as the first provider of mobile prepaid SIM cards in Iran.

It is licenced to operate a GSM 900 MHz mobile communication service with a capacity of 35,000 customers in the Esfahan province of the Islamic Republic of Iran.

The licence is valid for a 15-year period from May 19, 2001.

As of Dec 31, 2009, it operated 64 BTSs in 12 cities within the Esfahan Province.

"The divestment (in Samart) reinforced our commitment to focus on our primary business of mobile communication," said Axiata president and group chief executive officer Datuk Seri Jamaludin Ibrahim in a statement released on Thursday, Dec 23.

Hence, OSK is maintaining its "Buy" call on Axiata shares of RM5.80.

"Axiata remains our top pick for exposure to the regional and Malaysian telecommunication sector, trading at a compelling 12 times for financial year 2011 earnings per share," said OSK.

Similarly, MIDF Research said with good performance expected in financial year 2010 and the growth potential in Indonesia and Bangladesh, MIDF maintained a "Buy" recommendation for Axiata with a target price to RM5.50. ' Bernama

CyberSecurity Malaysia receives special CSR award

KUALA LUMPUR: CyberSecurity Malaysia, an agency under the Ministry of Science, TECHNOLOGY [] and Innovation (Mosti) has been awarded the Special Recognition Award for its Corporate Social Responsibility (CSR) programmes.

The award was given by the Committee for Asean Youth Cooperation and the National Youth Commission Philippines at the 16th Asean Youth Day held recently in Manila, Philippines.

Chairman of CyberSecurity General Datuk Seri Azumi Mohamad received the award.

In a statement here on Friday, Dec 24, the company said the award was given to in recognition of CyberSecurity's valuable contribution, involvement and initiatives in championing various CSR programmes.

"Our intention is mainly to give back to the community, thus the CSR programmes were created based on the agency's core function which is to educate Malaysians to be safe in the cyberworld," chief executive officer of CyberSecurity Lt Col (Rtd) Husin Jazri said in the statement.

Meanwhile, Husin was also awarded the Asean CSO Award 2010 in conjunction with the Asean CSO Conference 2010 recently held in Ho Chi Minh (HCM) City, Vietnam. ' Bernama

Asian markets mostly down at mid-day

KUALA LUMPUR: The FBM KLCI remained in negative territory for most of the morning trading session on Friday, Dec 24, in line with the general decline at key regional markets as investor sentiment was tepid following the recent downgrades of several European countries, as well thin trading ahead of the Christmas and year-end holidays.

The Asian markets were also mostly down in line with the weaker overnight close at Wall Street.

On Bursa Malaysia, the FBM KLCI fell 0.16% or 2.42 points to 1,512.06, weighed by losses including at Genting, AMMB and DiGi.

Losers beat gainers by 388 to 221 while 272 counters traded unchanged. Volume was 502.88 million shares valued at RM476.74 million.

The ringgit strengthened 0.52% to 3.0976 versus the US dollar; crude palm oil for the third month delivery gained RM3 per tonne to RM3.661, gold added US$3.20 per troy ounce to US$1,383.30 (RM4283.67), while crude oil was US$91.51 per barrel as of close on Dec 23.

At the regional markets, Japan's Nikkei 225 was down 0.70% to 10,273.80, the Shanghai Composite Index fell 0.45% to 2,842.46, South Korea's Kospi lost 0.28% to 2,031.76, Hong Kong's Hang Seng Index was down 0.23% to 22,850.34, Taiwan's Taiex shed 0.22% to 8,879.35 while Singapore's Straits Timex Index added 0.15% to 3,142.56.

At Bursa Malaysia, MAHB was the top loser Friday morning, falling 17 sen to RM6.12. Genting fell 16 sen to RM10.72, AMMB down 14 sen to RM6.90, DiGi lost 12 sen to RM25.06, Nestle fell 10 sen to RM43.70, while Perduren, SEG International and KNM fell nine sen each to 83.5 sen, RM2.23 and RM2.91 respectively.

The top gainer was Bernas, which added 40 sen to RM2.65. Batu Kawan rose 30 sen to RM16.56, KLK was up 26 sen to RM21.90, Konsortium Logistik was up 13 sen to RM1.63, Fima Corp added 11 sen to RM5.81, Parkson added 10 sen to RM5.64 and HELP rose nine sen to RM2.39.

IRCB was the most actively traded counter Friday morning, with 40.5 million shares done. The stock fell three sen to 25.5 sen. Other actives included Tejari, JCY, Hubline, DRB-Hicom, KNM warrants and Unisem warrants.

Global Markets-Stocks set for best Dec performance in a decade

HONG KONG: World stocks clung near two-year peaks while oil rose towards the US$92 per barrel mark on Friday after yet another burst of strong economic figures from the United States encouraged some year-end buying.

The latest rally in major European and US stock indices has given investors the biggest December gains in more than a decade.

Expectations of strong US fourth quarter performance was further cemented by latest data which showed demand for durable goods rising and consumer spending picking up.

A slew of strong numbers coming out of the world's biggest economy in recent weeks has given global growth bulls another reason to cheer and boosted commodities and stocks.

Reflecting that growing optimism, the Asia Pacific-ex Japan shares for energy shares advanced slightly while other indexes were broadly flat to slightly lower.

Trading was thin and prices confined in narrow ranges in Asia, with many centers on holiday in thin year-end markets. US markets are also shut along with many European centers.

World stocks as measured by the MSCI extended gains by nearly 6.5% so far this month while the Asia-Pacific version was largely unchanged.

"In the US, fears of a double dip recession have receded considerably with the extension of tax relief agreed in December and a second round of quantitative easing in November," Fitch Ratings said.

"High frequency activity has also turned more positive, reflecting strength in private consumption and corporate profitability."

That has made investors more sanguine towards developed markets.

Latest EPFR data showed developed markets equity funds posted their longest fund inflow streak since the fourth quarter of 2009 at the expense of emerging markets equity funds.

HEADY BREW

Copper prices too stuck near record peaks while the S&P/Goldman commodities index was set for its best monthly performance since May 2009.

Oil maintained its upward trajectory, having gained nearly 9 percent so far this month raising concerns that more sharp gains could be negative for Asian economies as it would feed into inflationary expectations. The region is a net importer of oil.

Easy money from the Federal Reserve, a strong global economic recovery, and Chinese policymakers that still seem a little too reluctant to sacrifice growth for necessary reforms has proved to be a heady brew for raw materials with major commodity indices up by 10 percent since mid-November, Gavekal strategists said.

The euro held its ground versus majors with the prospect of a significant short squeeze rising as the downside momentum was fading. A breach of US$1.32 could trigger a move back towards the Dec. 17 high around $1.3360.

"The euro is still a sell-on-rally trade. Anything above US$1.32 is worthwhile selling in my view and probably there won't be any buyers until the low US$1.30s, where we could see some Asian central bank interest," a trader at a US investment bank said.

Concerns on the eurozone's debt crisis kept simmering after Fitch cut Portugal's ratings by a notch to A-minus, pressuring peripheral European countries CDS higher.

Benchmark 10-year US Treasury yields were steady after rising slightly overnight to 3.40%. They are up by nearly 100 basis points since the Fed's announcement of its much awaited second round of quantitative easing last month. ' Reuters

FBM KLCI dips in early trade

KUALA LUMPUR: The FBM KLCI slipped into the red at mid-morning on Friday, Dec 24 in line with the mostly negative key regional markets as investors took a breather and stayed on the sidelines after having taken profits from the recent rallies.

The downtrend at the regional markets was also in line with the slightly weaker close at Wall Street and European markets.

At 10am, the FBM KLCI was down 0.99 point to 1,513.49, weighed by losses including at Genting, PPB, AMMB, Gamuda and Maxis.

Gainers trailed losers by 169 to 199, while 220 counters traded unchanged. Volume was 239.69 million shares valued at RM177.04 million.

At the regional markets, Japan's Nikkei 225 fell 0.71% to 10,272.96, the Shanghai Composite Index lost 0.42% to 2,843.28, Taiwan's Taiex fell 0.13% to 8,887.67, South Korea's Kospi shed 0.10% to 2,035.42 and Hong Kong's Hang Seng Index opened little changed at 22.9231.13.

Meanwhile, Singapore's Straits Times Index was up 0.26% to 3,146.06.

OSK Research in a note Dec 24 said the local market closed marginally lower yesterday but still ended the day above the 1,510 point-level.

The research house said it had been using this level to determine if the FBM KLCI could continue to add more points beyond the recent trading range, adding that yesterday was only the third session during which the index ended above the 1,510 point-level since Nov 12, 2010.

'We still need another strong push to the upside to confirm the breakout of the 1,510 point-level, especially after the index experienced a failed breakout attempt on Dec 9, 2010.

'Another failed breakout attempt at the 1,510 point-level would also see the index continue to trade within the recent trading band ranging from 1,474 pts to 1,510 points,' it said.

OSK Research said the nearly 20-point gain recorded on Tuesday and Wednesday had improved the market's near-term technical landscape, but the violation of the 1,510 point-level still needs to be confirmed.

'The FBM KLCI's historic high of 1,532 points is now the only resistance which we can detect. To the downside, the 1,510 point-level is still the immediate support while another support is seen at the 1,485- 1,492-point area,' it said.

On Bursa Malaysia, Nestle was the top loser at mid-morning and fell 20 sen to RM43.60; Hap Seng fell 10 sen to RM18 sen to RM6.08, APM down nine sen to RM5.55, Genting and PPB fell eight sen each to RM10.80 and RM16.80, AMMB down nine sen to RM6.95, Maxis lost four sen to RM5.31, Gamuda down three sen to RM3.83 while Kencana lost seven sen to RM2.31.

Among the gainers were Batu Kawan, Bernas, F&N, KLK and HELP.

Adventa continued to attract investor interest and was actively traded this morning on market talk that it could be a potential acquisition target by a healthcare firm based in the US.

The stock rose 19 sen to RM2.83 with 3.87 million shares done.

Other actives included JCY, Tejari, IRCB and Unisem warrants.

Nikkei opens lower on yen but sentiment strong

TOKYO: Japan's Nikkei average opened lower on Friday, with a stronger yen against both the dollar and euro after more ratings downgrades of European countries weighing on shares in holiday-thinned trade.

But underlying strong sentiment, which helped lift the Nikkei to its highest level since May 14 on Wednesday, reflecting general bullishness in global equities markets and a positive outlook for 2011, was seen likely to limit losses and provide support throughout the day.

The benchmark Nikkei fell 0.6 percent or 65.92 points to

10,281.84. ' Reuters

HELP advances in early trade

KUALA LUMPUR: HELP INTERNATIONAL CORPORATION [] Bhd shares advanced on Friday, Dec 24 after the education group proposed a final gross dividend of two sen per share for the financial year ended Oct 31, 2010 amounting to RM2.13 million.

At 9.50am, HELP was up 10 sen to RM2.40 with 39,500 shares done.

HELP's net profit for the fourth quarter ended Oct 31, 2010 rose 8.4% to RM6.47 million from RM5.97 million a year ago, due mainly to increase in its revenue from rising demand for its home-grown programmes and prudent cost management.

OSK Research upgraded the stock from Neutral to Buy and said that although HELP's FY10 revenue was 8% below its own and consensus expectations, the net profit was within projections, largely attributed to better than expected margins.

It said revenue rose 8.9% year-on-year (y-o-y) while net profit climbed 25.9% y-o-y owing to better margins driven by stronger demand for its home-grown programs, which generally command higher margins.

'We maintain our FY11 forecast and introduce our FY12 estimates.

'Accordingly, our target price is lowered from RM2.69 to RM2.59 based on 14x PER on FY11 EPS, plus the adjusted current net cash of RM0.32 per share as at end-FY10 versus RM0.42 previously. Nevertheless, given the more than 10% upside, we upgrade our recommendation from Neutral to Buy,' it said in a note Dec 24.

CIMB Economics Research: Inflationary pressures persist but not a threat

KUALA LUMPUR: CIMB Economics Research said Malaysia's headline inflation is expected to edge higher from 1.4% in 1H10 to an estimated 2.0% in 2H10 due to the one-off hike in transport prices as well as higher food prices.

It said on Thursday, Dec 23 that going into 2011, inflationary pressures will persist owing to improving domestic demand, firmer commodity prices and rising food prices.

'There is also upside risk emanating from the continued rationalisation of subsidies. We expect overall CPI growth to average 1.7% this year and 3.0% in 2011,' it said in a report.

CIMB Economics Research said due to lingering external risks and moderating growth, it expects interest rates to stand pat in 1H11. Thereafter, as the economy starts to gain momentum, Bank Negara Malaysia may resume normalizing interest rates to keep a lid on inflation as well as to prevent a credit-financed bubble from emerging.

'We expect the overnight policy rate to hit 3.25% by end-2011 (from current level of 2.75%),' it said.

BToto confirms early talks of corporate exercise, possible strategic investor

KUALA LUMPUR: BERJAYA SPORTS TOTO BHD [] has confirmed there has been preliminary discussions within the company on a possible corporate exercise which may result in the entry of a strategic investor.

The company said on Thursday, Dec 23 that while there had been initial contact with several potential strategic investors, no negotiations have been conducted with any strategic investor at this juncture.

BToto explained there were no negotiations since the internal discussions and planning were still ongoing.

The company was confirming a report in The Edge Financial Daily which appeared on Thursday entitled 'Possibility of strategic investors for BToto'.

'Shareholders should take note that the corporate exercise may or may not come to fruition and hence they should take this into account in making any investment decisions. A detailed announcement will be made in due course should parties succeed to come to terms,' said BToto.

BToto however clarified that Tan Sri Vincent Tan Chee Yioun, who is the chairman/CEO of BERJAYA CORPORATION BHD [] had not personally purchased any BToto shares in the period from June 2010 to-date.

It said Tan had instead sold 39.8 million BToto shares from his personal holdings during the period. BCorp is the ultimate holding company of BToto.

'BCorp and its subsidiary companies had purchased BToto shares in the open market as stated in the article and consequently, Vincent Tan being a substantial shareholder of BCorp is deemed to have an interest in these purchases,' it said.

HELP 4Q net profit up 8.4% to RM6.47m, proposes 2c dividend

KUALA LUMPUR: HELP INTERNATIONAL CORPORATION [] Bhd net profit for the fourth quarter ended Oct 31, 2010 rose 8.4% to RM6.47 million from RM5.97 million a year ago, due mainly to increase in its revenue from rising demand for its home-grown programmes and prudent cost management.

It announced on Thursday, Dec 23 revenue rose to RM27.33 million from RM26.2 million a year earlier. Earnings per share were 6.2 sen while net assets per share was 80 sen.

HELP proposed a final gross dividend two sen per share for the financial year ended Oct 31, 2010 amounting to RM2.13 million.

For the full year, HELP's net profit rose 23.6% to RM19.1 million from RM15.45 million on the back of a 8.9% increase in revenue to RM105.2 million.

METALS-Industrial metals fall; bullish outlook for 2011

LONDON: Copper fell 1 percent on Thursday,, Dec 23 taking a breather from record highs hit earlier this week, as end of year book-squaring and falling equities in top consumer China weighed on base metals.

By 1136 GMT, copper for three-month delivery on the London Metal Exchange traded at $9,263.25 a tonne from $9,350 at the close on Wednesday and compared with a low at $9,252.25.

The red metal, used in power and CONSTRUCTION [], lost ground for the second session running, and remained near record highs at $9,392 a tonne touched on Tuesday.

"You have thinning liquidity, which amplifies any fall," said Robin Bhar, analyst at Credit Agricole. "Looks as though traders are looking to square-up and take profits. "The rise that we had to a new record, was on the back of Collahuasi news...but this week and next week should see further profit taking."

Falling ore grades, disruptions and project delays mean that copper supply will, possibly starting this year, fall short of demand estimated at about 19 million tonnes this year.

Chile's giant Collahuasi copper mine is yet to find an alternative port for its shipments, after a port accident halted its exports. Its quest for a new export route may be hobbled by environmental and logistical hurdles.

In its latest monthly release, the International Copper Study Group said world refined copper consumption exceeded production by 436,000 tonnes between January and September this year.

Concern about supplies in the near term have pushed the metal into a $53 a tonne backwardation -- premium for cash material over the three-month contract -- compared with a discount of about $39 a tonne at the end of March.

"All we are seeing is end of year erratic, choppy trading," added Bhar on copper. "We see record highs next year."

''

CHINA STOCKS FALL

Shanghai and Hong Kong shares fell on Thursday as a cash crunch in the mainland's financial system weighed on the markets and a slowdown in trading activity kept investors on the sidelines

The falling stock markets in China hit base metals sentiment, although analysts remain bullish on copper next year, due to falling supplies.

"Weaker Asian equity markets are pushing the industrial metals down," Commerzbank analyst Eugen Weinberg said. "It is also normal to see a correction after record highs were touched earlier this week."

He added that erratic movements in industrial metal prices are to be expected as the year end approaches, with markets hampered by low liquidity levels.

Also depressing sentiment was a trend of growing LME copper inventories seen in most of December. On Thursday, copper stocks rose to 3,775 tonnes to a near two month high at 367,725 tonnes.

In other markets, the dollar fell against a basket of currencies, with the euro helped by supportive comments from China, but analysts said the outlook for the single currency was shaky, with fresh losses expected into 2011.

A Chinese Foreign Ministry spokeswoman said China was willing to help countries in the euro zone return to economic health and would support the International Monetary Fund bailout package for the bloc.

A weak U.S. currency makes metals priced in dollars less expensive for holders of other currencies.

Among other metals, aluminium traded at $2,449.25 versus $2,462. LME stocks for the metal, used in transport and packaging, jumped 5,775 tonnes to 4.28 million tonnes.

A large portion of those aluminium stocks are tied up in finance deals.

Steel-making ingredient nickel traded at $23,830 from $24,050 while battery material lead was at $2,430 from $2,440.

Russia's UC RUSAL has hired Bank of America Merrill Lynch to value its stake in Norilsk Nickel, an indication, an analyst said, that its owners are seriously considering sale.

Zinc traded at $2,303 a tonne from $2,330 and tin was at $26,600 from $26,825. - Reuters

FTSE hovers below 6,000 level, oils advance

LONDON: Britain's leading share index held firm in thin volumes at midday on Thursday, Dec 23, supported by a stronger energy sector although a slight retreat by miners anchored the index just below the 6,000 level.

At 1146 GMT the FTSE 100 index was up 9.70 points, or 0.2 percent at 5,993.19, having reached a fresh 30 month peak early on at 5,999.16.

Trading volumes were just 13 percent of the 90-day average on the final full-day session before the Christmas break.

"Private investors have been pumping money into the stock market this year. If the FTSE does smash through the 6,000 barrier we might see even the most risk-averse moving their money out of savings accounts into equities," said Will Hedden, a sales trader at IG Index.

Integrated oils provided the main fuel for the blue-chip gains as the crude price climbed towards a two-year high, with BP ahead 1.4 percent.

Retailers rallied on hopes for a last-minute rush for Christmas presents as the snow blanketing Britain continues to thaw, with DIY stores group Kingfisher up 1.7 percent.

Tour operator TUI Travel was the top blue-chip riser, ahead 2.2 percent as a easing in the severe weather conditions helped ensure travellers could get away for Christmas breaks.

''

MINERS MELT

Weak miners were the main drag on blue chips as gains in metals prices cooled after a recent rally, with Xstrata among the worst off, down 0.7 percent.

Rio Tinto shed 1.0 percent as it offered an agreed $3.9 billion to buy African-focused coal miner Riversdale in a deal expected to be challenged by rivals.

ARM Holdings was the top blue-chip faller, down 4 percent having soared 9 percent higher on Thursday on reports of a possible breakthrough move with Microsoft.

The domestic economic picture remained unsettled.

British service sector activity declined 0.4 percent in October, giving back more than half the previous month's 0.7 percent rise, data showed.

The Bank of England's executive director for markets, Paul Fisher, said in a newspaper interview that Britain's economy could suffer another period of contraction in 2011.

U.S. stock index futures pointed to a flat opening on Wall Street on Thursday with investors having a big batch of U.S. economic data to digest.

November durable goods data and the latest weekly jobless claims data were both due at 1330 GMT, with the final reading of the December Reuters/University of Michigan consumer sentiment survey out at 1455 GMT, and November new home sales data scheduled for 1500 GMT.

Irish government takes control of Allied Irish

DUBLIN: Ireland's government said on Thursday, Dec 23 it would pump 3.7 billion euros into Allied Irish Banks (AIB) setting it on course for nearly 93 percent ownership of what was once the country's largest publicly traded lender.

AIB will be required to raise a further 6.1 billion euros ($8.01 billion) of core Tier 1 capital before the end of February to get its capital ratio up to 14 percent, under the terms of Ireland's bailout from the European Union and the IMF.

AIB, a former stock market darling, will have to cancel its listing on the main Irish and British stock markets and will apply instead for a listing on the enterprise securities market of the Irish exchange to give shareholders access to a trading facility for their stock.

"This capital is essential to allow AIB to fulfil its role in supporting the Irish economy," Finance Minister Brian Lenihan said in a statement.

AIB's aggressive courtship of property developers proved its undoing when Ireland's real estate market bubble burst, triggering huge industry-wide losses that forced the government to seek an 85 billion-euro bailout from the EU and the IMF.

Shares in Allied Irish Banks dropped 19 percent to 32 euro cents following the announcement. The stock hit a peak of over 24 euros in 2007, when Ireland's property boom was at its height.

The government is using funds from the National Pension Reserve Fund (NPRF) to bulk up AIB's core Tier 1 capital ratio, a key measure of financial strength, to 8 percent ahead of a year-end deadline set by the central bank.

In return, the NPRF will get ordinary shares boosting its current 19 percent stake in the bank to nearly 50 percent.

The NPRF will also get convertible non-voting shares which will be converted into ordinary stock, giving it a near 93 percent holding, once AIB completes the sale of its Polish interests to Spain's Santander.

AIB has sold off prized overseas assets to strengthen its balance sheet but spiralling loan losses kept raising its additional capital requirements from 7.4 billion euros in March to 10.4 billion euros in September to 15.7 billion euros in November when Ireland agreed to "overcapitalise" its banks in return for EU/IMF assistance. - Reuters

Fitch downgrades Hungary to BBB-, outlook negative

BUDAPEST: Fitch cut Hungary's long term foreign currency credit rating to BBB- with a negative outlook on Thursday, Dec 23, warning that the lack of a coherent medium-term fiscal strategy undermined confidence in the sustainability of public finances.

"The reversal of pension reforms and lack of a coherent medium-term fiscal strategy undermines confidence in the long-term sustainability of the public finances," it said in a statement.

"Failure to implement credible medium-term fiscal consolidation measures that restore the public finances to a sustainable course could lead to a downgrade," it said. - Reuters

Axiata completes sale of Samart stake to focus mobile biz

KUALA LUMPUR: Axiata Group Bhd has completed the sale of its entire 18.9% stake in Samart Corporation Public Company in line with its strategy to focus on its mobile communications business.

Axiata, which has held the stake in Samart since 1997, disposed its shares to the Thailand-based company's existing shareholders Charoenrath Vilailuck and Watchai Vilailuck for US$34.8 million cash.

Samart, which has interests in various subsidiaries focusing on mobile multimedia, ICT solutions and services and TECHNOLOGY [] related businesses, represents one of Axiata's non-mobile investments.

Axiata still holds its 24.4% stake in Samart i-Mobile, focusing on mobile, multimedia and international business.

In a statement Thursday, Dec 23, Axiata president and group chief executive officer Datuk Seri Jamaludin Ibrahim said the divestment reinforces its commitment to focus on its primary business of mobile communications.

'As with our announcement in July on the disposal of our stake in Multinet, Pakistan, which the parties are in the midst of completing, this transaction reflects our strategic direction of focusing on our core areas,' he said.

Pintaras Jaya unit lands RM26.1m job

KUALA LUMPUR: PINTARAS JAYA BHD [] unit Pintaras Geotechnics Sdn Bhd has secured a RM26.1 million contract to undertake earthwork, piling including pilecaps and stumps for development of service apartments in Kuala Lumpur.

Pintaras said on Thursday, Dec 23 Pintaras Geotechnics was awarded the contract by Exceljade Sdn Bhd, and that the services apartments were located at Jalan Tun Razak / Jalan Raja Muda Abdul Aziz.

It said the works would commence on Feb 21, 2011 and be completed within 18 months.

It said the contract would contribute positively to its future earnings.

UEM Land, UMLand to jointly develop RM670m project in Puteri Harbour

KUALA LUMPUR: UEM Land Bhd and UNITED MALAYAN LAND BHD [] (UMLand) are to jointly develop the second mixed development project in Puteri Harbour with an estimated gross development value of RM670 million, and gross development profit of RM160 million.

UEM Land, the master developer of Nusajaya, yesterday signed a sale and purchase agreement (SPA) valued at RM49.6 million with Nusajaya Consolidated Sdn Bhd (NCSB), a 50:50 joint venture company of UEM Land and UMLand to acquire the parcel of land, Parcel Commercial South 3 (Parcel CS3) at Puteri Harbour.

The Parcel CS3 is located within the Commercial South development of Puteri Harbour.
Commercial South is envisioned to be a business and residential hub with high towers overlooking the marinas of Puteri Harbour.

In a joint statement Thursday, Dec 23, the companies said regional companies would be targeted to locate their offices here and international investors were expected to form the bulk of purchasers for the condominiums.

UEM Land managing director Datuk Wan Abdullah Wan Ibrahim said the company was are excited with the exercise of the option and the SPA as it reaffirmed UMLand's commitment and belief towards the overall development potential of Puteri Harbour.

'We have enjoyed a strong working relationship with UMLand in the development of Parcel A3 and are pleased with the progress achieved for Parcel A3, which we hope to introduce to the market in 2011.'

'With UMLand's involvement in the development, it will contribute to realising our vision to develop Puteri Harbour as a premier waterfront destination for the region.'

Presently, NCSB is developing boutique waterfront apartments scheduled to be launched in 2011.

UMLand group chief executive officer Pee Tong Lim said that with the development activities picking up in Nusajaya, the joint project was timely and augured well with UMLand's business plans and strategies.

'This development is expected to contribute to UMLand's group earnings from financial year 2012 onwards,' said Pee.

Sime Darby suing Ahmad Zubir and four others

KUALA LUMPUR: SIME DARBY BHD [] has filed a civil suit against its ex-president and group chief executive Datuk Seri Ahmad Zubir and four others in relation to the Qatar Petroleum Project (QP), the Maersk Oil Qatar Project (MOQ Project) and the project relating to the CONSTRUCTION [] of marine vessels known as the Marine Project.

The other four being sued are Datuk Mohamad Shukri Baharom, Abdul Rahim Ismail, Abdul Kadir Alias and Mohd. Zaki Othman.

In a filing to Bursa Malaysia on Thursday, Dec 23, Sime Darby said it was seeking an order that each of the defendants make restitution in the sum of RM80.51 million, wrongly paid to consultants in the QP Project.

It also asked that Abdul Kadir Alias and Mohd Zaki make restitution in the sum of RM6.6 million wrongly waived with respect to the provision by RNZ Integrated (M) Sdn Bhd of the performance bond in the MOQ Project.

Sime Darby said it was seeking an order that Mohamad Shukri, Abdul Rahim and Ahmad Zubir make restitution in the sum of RM6.2 million being the retention sum wrongly released to RNZ in the MOQ Project.

It also wanted each of the defendants to make restitution in the sum of US$30. 81 million being consultancy fees wrongly paid in the MOQ Project.

Further, it also asked for an order that Ahmad Zubir and Mohamad Shukri make restitution of US$48 million, being the losses suffered as a result of the total failure to deliver the three marine vessels in Project Marine.

The conglomerate also sought for compensation for loss of profit by reason of the failure to deliver the 3 marine vessels in time; as well as aggravated and exemplary damages from each of the defendant.

'The civil suit is filed against the Defendants following breaches of duties owed to Sime Darby and the subsidiaries named in the civil suit.

'The civil suit will have no operational impact on the Sime Darby Group. As for the financial impact, the losses arising from the three projects have been provided for. There are no losses that could arise from these proceedings except an order for payment of costs if Sime Darby or its subsidiaries were unsuccessful in this action or if the Defendants include a counterclaim which was allowed by the Court,' it said.

''

Please click on the following links for details of Sime Darby's statement of claim posted on Bursa Malaysia:

Statement of Claim - Part 2 of 2.pdf

Statement of Claim - Part 1 of 2.pdf

Selangor Properties 4Q net profit up 47.7% to RM53.93m

KUALA LUMPUR: Selangor PROPERTIES [] Bhd net profit for the fourth quarter ended Oct 31, 2010 jumped 47.7% to RM53.93 million from RM36.52 million a year earlier, mainly attributable to the revaluation surplus of RM29.7 million on its investment properties and higher unrealised foreign exchange gain.

Its revenue for the quarter fell to RM52.25 million from RM155.12 million last year. Earnings per share was 15.7 sen while net assets per share was RM5.12.

In a filing to Bursa Malaysia on Thursday, Dec 23, the company proposed a final dividend of 10 sen per share less 25% tax in respect of the financial year ended Oct 31, 2010, totaling RM25.77 million.

For the full year, Selangor Properties' net profit rose 29.3% to RM42.62 million from RM32.97 million a year earlier.

It said the main contributors were from property development, investment properties and education.

'Barring unforeseen circumstances, the group's prospect for next financial year remain positive,' it said.

Business delegation to Buenos Aires, Sao Paulo identifies business worth RM19.5m

KUALA LUMPUR: A 16-member delegation of Malaysian companies to Buenos Aires and Sao Paulo, led by Malaysia External Trade Development Corp (Matrade), has identified potential business estimated at RM19.55 million.

In a statement here on Thursday, Dec 23, Matrade said it organised 169 one-on-one business meetings between the delegation members and representatives of the local business community in both cities during the mission from Dec 5-14, 2010.

Matrade said Malaysia's business ties with Argentina and Brazil were set to be significantly enhanced with the signing of the memorandum of understanding (MoU).

"The MoU calls for increased trade networking and cooperation among the business communities of all three countries," it said.

It said in the logistics sector, Argentina and Brazil offered opportunities for Malaysian companies to collaborate in offering total logistics solutions.

In the creative and design sectors, both countries expressed interest in Malaysian-designed jewellery, fashion and furniture.

"As both countries are widely considered to be the leading fashion-conscious countries in South America, they represent significant export potential for our companies," it said. ' Bernama

Share prices close lower on profit taking

KUALA LUMPUR: Share prices on Bursa Malaysia closed lower on Thursday, Dec 23 on profit taking activities as investors were reluctant to keep heavy positions ahead of Christmas holiday, dealers said.

Gains in some selected heavyweights managed to keep the FTSE Bursa Malaysia KLCI above 1,500 level.

At 5pm, the KLCI edged down by 0.57 of a point to 1,514.48.

The benchmark index which opened 3.64 points higher at 1,518.69, moved between 1,511.2 and 1,518.8.

The Finance Index declined 34.38 points to 13,840.01, the PLANTATION [] Index slipped 1.65 points to 7,920.47 while the INDUSTRIAL INDEX [] rose 5.72 points to 2,816.03.

The FBM Emas Index slipped 7.04 points to 10,348.41, the FBM 70 Index was 23.229 points lower at 10,876.73 while the FBM Ace Index was down by 6.16 points to 4,263.22.

Losers led gainers by 383 to 356, while 305 counters were unchanged, 348 untraded and 30 others suspended.

Total volume declined to 1.251 billion shares valued at RM1.646 billion from 1.253 billion shares worth RM1.664 billion yesterday. On the Main Market, volume decreased to 825.26 million units valued at RM1.559 billion from Wednesday's close of 976.982 million shares worth RM1.596 billion.

Warrants, however, rose to 370.065 million shares worth RM73.64 million from 228.075 million units valued at RM56.218 million previously.

Turnover on the ACE Market improved to 53.415 million units worth RM11.435 million from Wednesday's close of 43.5 million shares valued at RM8.267 million.

Among active stoks, KNM-CE:CW added three sen to 33 sen, INTEGRATED RUBBER CORPORATION [] rose 4.5 sen to 28.5 sen and MAS-CA:Cw increased 6.5 sen to 18 sen.

Of the heavyweights, CIMB declined six sen to RM8.54, Maybank and Petronas Chemicals were both unchanged at RM8.50 and RM5.57 respectively while Tenaga gained nine sen to RM8.39.

Consumer products accounted for 54.231 million shares traded on the Main Market, industrial products 226.414 million, CONSTRUCTION [] 59.643 million, trade and services 272.211 million, TECHNOLOGY [] 36.562 million, infrastructure 12.705 million, finance 44.016 million, hotels 2.52 million, PROPERTIES [] 88.698 million, plantations 22.396 million, mining 621,700, REITs 5.172 million and closed/fund 69,800. ' Bernama

FBM KLCI remains in the red at mid-day

KUALA LUMPUR: The FBM KLCI remained in the red at the mid-day break on Thursday, Dec 23 while Asian markets were mixed in thin trading amidst caution investor sentiment despite the fairly firmer overnight close at Wall Street.

The tepid mood at key regional markets was seen as a breather ahead of the Christmas weekend, as well the general reluctance to do much after having taken some profits recently when the markets rallied to a two-year high, according to Reuters.

On Bursa Malaysia, the FBM KLCI slipped 0.16% or 2.40 points to 1,512.65, weighed by losses including at DiGi, CIMB, Genting and Petronas Gas.

Gainers trailed losers by 292 to 344, while 282 counters traded unchanged. Volume was 688.3 million shares valued at RM783.63 million.

The ringgit strengthened 0.38% to 3.1305 versus the US dollar; crude palm oil for the third month delivery rose RM37 per tonne to RM3,657, crude oil added eight cents per barrel to US$90.56 while gold gained US$2.80 per troy ounce to US$1,388.15.

At the regional markets, the Shanghai Composite Index fell 0.54% to 2,862.44, South Korea's Kospi slipped 0.22% to 2,033.59, while Taiwan's Taiex added 0.57% to 8,911.36, Singapore's Straits Times Index rose 0.40% to 3,156.95 and Hong Kong's Hang Seng Index gained 0.19% to 23,088.01.

Japan's Nikkei 225 was closed to observe a national holiday for the Emperor's birthday.

On Bursa Malaysia, DiGi fell 70 sen to RM25.20, Nestle lost 50 sen to RM43.20, Dutch Lady fell 20 sen to RM17.60, Kulim down 18 sen to RM12.56, Batu Kawan and PetGas fell 14 sen each to RM16.28 and RM11.22, CIMB down six sen to RM8.54, Genting Malaysia lost five sen to RM3.29 while Genting was down four sen to RM10.76.

Among the gainers this morning were glove makers, as Adventa surged 57 sen to RM2.49, Hartalega up 37 sen to RM5.33, Latexx rose 26 sen to RM2.72, Supermax up 14 sen to RM4.31 while Kossan and Top Glove added 12 each to RM3.20 and RM5.10.

Meanwhile, actives included KNM, Olympia, Land & General and Berjaya Corporation.

#Flash# PLUS extends deadline to Jan 10, adjourns EGM

KUALA LUMPUR: PLUS EXPRESSWAYS BHD []'s board has agreed to extend the deadline for it to receive''takeover bids to Jan 10, 2011 following requests from minority shareholders at the company's extraordinary general meeting (EGM) today.

At its''EGM on Thursday, Dec 23,''PLUS Expressways' shareholders also voted in favour of adjourning the meeting to a later date.

PLUS Expressways had earlier set the deadline at 5pm on Thursday, Dec 23 ''for all interested offers and stipulated a list of minimum disclosures.

Also due on Jan 10 is the required RM50 million cash deposit for all keen bidders to confirm their offer.

The extension gives more time for PLUS Expressways' board to consider the latest bid from little known Jelas Ulung Sdn Bhd, who had on Monday offered RM26 billion or RM5.20 per share for the toll concessionaire's business and undertakings.

PLUS Expressways' board had in November accepted a RM23 billion offer or RM4.60 per share from UEM Group Bhd and the Employees Provident Fund (EPF).

At 1pm, PLUS Expressways shares gained three sen to RM4.65.

FBM KLCI loses momentum in early trade

KUALA LUMPUR: The FBM KLCI lost some momentum in early trade on Thursday, Dec 23 and slipped into negative territory at mid-morning, weighed by losses at key blue chips including DiGi,'' UMW, CIMB and Genting, as well as PLANTATION [] stocks.

At 10am, the benchmark index, which had started the day on a promising note, fell 1.81 points to 1,513.24.

Losers led gainers by 207 to 181, while 245 counters traded unchanged. Volume was 271.09 million shares valued at RM243.01 million.

Regional markets were mixed, with the Shanghai Composite Index down 0.17% to 2,872.88 while South Korea's Kospi shed 0.12% to 2,035.66.

The Singapore Straits Times Index added 0.50% to 3,160.10, Taiwan's Taiex gained 0.42% to 8,897.46 and Hong Kong's Hang Seng Index opened 0.3% higher at 23,117.67.
Japan's Nikkei 225 was closed to observe a national holiday for the Emperor's birthday.

Commenting on Bursa Malaysia, OSK Investment Research in a note Dec 23 said follow-through buying yesterday buoyed the market to a higher close for the second consecutive session.

It said that after the nearly 20-points gain over the last two sessions, the FBM KLCI was now trading further away from the uptrend line. Another positive development is that the index ended above 1,510 points for only the second time since Nov 12, 2010.

The research house said although the index closed above the 1,510 point-level yesterday, this breakout still needs to be confirmed, especially after it experienced a failed breakout attempt on Dec 9, 2010.

'Whether or not the market could continue to add more points from the current level would determine its immediate outlook. This is because another failed breakout attempt at the 1,510 point-level would also see the index continue to trade within the recent trading band ranging from 1,474 pts to 1,510 points

'The FBM KLCI's historic high of 1,532 points is now the only resistance which we can detect. To the downside, the 1,510 point-level is the immediate support while another support is seen at the 1,485- 1,492-point area,' it said.

On Bursa'' Malaysia, the top loser at mid-morning was DiGi that fell 70 sen to RM25.20; Kulim lost 18 sen to RM12.56, Batu Kawan fell 16 sen to RM16.26, PPB lost 12 sen to RM17.72, while Keck Seng, Boustead, UMW and CIMB fell five sen each to RM6.70, RM5.36, RM7.05 and RM8.55 respectively.
Meanwhile, Genting and RHB Capital fell four sen each to RM10.76 and RM8.56.

Gainers included BAT, Dutch Lady, Adventa, Tan Chong, Padini, Media Prima, Nestle and MAS.

The actives included KNM shares and warrants, Land & General, KNM and MAS.

Adventa rises on dividend; OSK Research ups TP to RM3.80

KUALA LUMPUR: ADVENTA BHD [] shares jumped on Thursday, Dec 23 after the glove maker proposed a first and final tax exempt dividend of 7 sen per share for the financial year ended Oct 31, 2010.

At 10.30am, Adventa was up 27 sen to RM2.19 with 1.32 million shares done.

Adventa's net profit for the fourth quarter ended Oct 31, 2010 surged 220% to RM11.8 million from RM5.36 million a year ago, on the back of a 22% improvement in revenue to RM91.02 million.

For the full-year, Adventa's net profit more than doubled to RM35.8 million from RM16.96 million, while revenue rose 19% to RM336.17 million from RM282.74 million.

OSK Investment Research in a note Dec 23 said Adventa's 4QFY10 results were above expectations, mainly contributed by positive tax rates.

"Profit before tax was, however, lower due to a time lag as only about 70%-80% of the higher costs incurred as a result of rising latex prices and the weakening of the USD against MYR were passed on to customers.

'We are downgrading our FY11 earnings by 21% but maintain a Buy with a higher target price of RM3.80 as we roll forward to FY12 valuation,' it said.

L&G active, up in early trade

KUALA LUMPUR: Land & General Bhd shares were active in early trade on Thursday, Dec 23 after the company said yesterday its unit was acquiring land and PROPERTIES [] in Negeri Sembilan for an upscale residential development.

At 10.30am, L&G was up 1.5 sen to 50 sen with 12.51 million shares traded.

L&G said it was planning the property project with an estimated gross development value of RM555 million following its latest corporate move to acquire land and properties within the Tuanku Jaafar Golf and Country Resort in Negeri Sembilan for RM25 million cash.

Fund managers see value in UK equities, eye M&A boom

LONDON: British fund managers upped their exposure to UK equities during December, buoyed by hopes of bumper dividends from cash-rich companies and expectations of a 2011 takeover boom, a Reuters poll has found.

A survey of 12 investment managers showed the average allocation in global equity portfolios to UK stocks jumped to 16.3 percent from 12.6 percent in November, indicating strong confidence in Britain's economic outlook and the relative value of UK stocks over "fashionable" emerging market equities.

"It is possible that we might run with our maximum equity weightings next year, although our focus will be on 'quality' companies in the developed world markets, which our research suggests are trading at an almost unprecedented discount to emerging market and lesser-quality companies," Thomas Becket, chief investment officer of PSigma Investment Management, said on Wednesday, Dec 22.

Becket said many UK companies were in compelling financial shape, holding large sums of surplus cash that may find its way back to investors in the form of dividends and share buybacks.

That same cash could also help fuel fresh merger and acquisitions activity in 2011, he said. [ID:nN1766841]

Based on data provided by the same 11 fund managers polled last month, allocations to UK equities rose to 13.3 percent.

While the overall equities allocation climbed 1.4 percentage points to 54.2 percent in December, fund managers cut euro zone equity holdings again amid fears of economic contraction across the region, particularly in Portugal and Spain. [ID:nLDE6AS154]

Average euro zone equity allocations dropped to 14.5 percent from 15.2 percent on a like-for-like basis, and even lower still to 13.8 percent in December's enlarged poll.

"It is unclear as to how the Euro zone periphery situation will be resolved," said Alec Letchfield, chief investment officer, UK Wealth, at HSBC Global Asset Management.

"What is clear, however, is that greater unity is required in the European policy response ... the disparity in growth rates between core Europe and peripheral Europe are, if anything, likely to widen further," he said.

Although sentiment towards euro zone stocks continued to wane in the last poll of 2010, respondents flagged a growing appetite for riskier investments like hedge funds and private equity, with the average exposure to alternatives rising to 16.4 percent based on the enlarged poll sample -- the highest level seen in more than a year.

Exposure to cash fell for the fifth consecutive month to 4.9 percent from 6.3 percent in November.

Investment managers sharply cut their percentage allocations to UK gilts in their global bond portfolios in December, in the same month a Bank of England survey revealed expectations for inflation over the next 12 months had accelerated to 3.9 percent, almost double central bank targets.

Average allocations slumped to 17.9 percent from 20.7 percent on a like-for-like basis, and to 17.3 percent in the enlarged December poll. - Reuters

China ready to buy 4-5 bln euros of Portugal debt

LISBON: China is ready to buy 4-5 billion euros ($5.3-$6.6 billion) of Portuguese sovereign debt to help the country ward off pressure in debt markets, the Jornal de Negocios business daily reported on Wednesday, Dec 22.

The paper said, without citing any sources, that a deal reached between the two governments will lead to China buying Portuguese debt in auctions or in the secondary markets during the first quarter of 2011.

China's central bank declined to comment on the report, while Portuguese government officials were not immediately available for comment.

It is unclear whether China's government would be prepared to take on so much fresh exposure to Portugal in such a short space of time, given that Beijing has faced domestic political pressure to invest the country's foreign reserves more carefully.

Chinese investment funds suffered some large, high-profile losses during the global financial crisis.

The euro rose to the day's high versus the dollar on Wednesday on the back of the report, climbing around 30 pips to a session high of $1.3168 according to Reuters data.

However, "the report is unsourced so although it's providing a bit of support, clients certainly aren't putting much weight on it," said one trader.

Portugal has moved into the eye of the storm in the euro zone's debt crisis, with borrowing costs spiking as investors grew concerned it would be next in line to seek an international bailout after Ireland and Greece.

Despite the report, the premium investors demand to hold Portuguese 10-year bonds rather than safer German Bunds was still seven basis points from Tuesday's settlement levels to 378 bps. Last month the spread hit a euro lifetime record of more than 481 bps but has narrowed thanks to bond buying by the European Central Bank.

Portugal has completed its debt issuance programme for 2010, and according to the IGCP debt agency, its next bond redemption is due in April, when it has to repay 4.5 billion euros. In total, Lisbon has to repay 9.5 billion euros in bonds next year.

The 2011 budget puts next year's net financing needs at 10.75 billion euros. The IGCP has not yet announced the issuance programme for next year.

Finance Minister Fernando Teixeira dos Santos met Chinese Finance Minister Xie Xuren and the head of the People's Bank of China during a visit to the country last week.

Portuguese officials have said the government is trying to diversify the debt investor base, with China as a priority.

On Tuesday Moody's Investor Service warned it may downgrade Portugal's A1 rating by one or two notches after a review that will take up to three months, citing high borrowing costs and weak growth prospects.

In October, during a visit to Greece, Chinese Premier Wen Jiabao offered to buy Greek bonds when Athens resumed issuing.

A month later, President Hu Jintao visited Portugal and offered "concrete measures" to help the weak economy but stopped short of promising to buy Portuguese bonds.

Chinese Vice Premier Wang Qishan said on Tuesday that Beijing supported efforts by the EU and the International Monetary Fund to calm global markets in the wake of Europe's debt crisis and said China had taken "concrete actions" to help some European countries.

Later in the day, the Chinese commerce minister put the onus more firmly on EU policymakers to act.

"We want to see if the EU is able to control sovereign debt risks and whether consensus can be translated into real action to enable Europe to emerge from the financial crisis soon and in a good shape," Chen Deming said.

Major euro zone economy France played down the concerns over Portugal on Wednesday. The government has "no particular worry" about Portugal, government spokesman and Budget Minister Francois Baroin said, responding to reporters' questions. - Reuters

China launches new agency to restructure state firms

BEIJING: China launched a new agency to hasten a consolidation among its weaker state-owned firms on Wednesday, Dec 22, in a long-awaited step towards creating leaner and more powerful national champions.

The State-owned Assets Supervision and Administration Commission (SASAC), which is both a regulator and shareholder of some Chinese state giants, said the new Guoxin Asset Management Corp will takeover smaller firms outside strategic sectors.

The setting up of Guoxin confirms a report by Reuters last week that the agency could be established on Wednesday. [ID:nTOE6BF01N]

"The establishment of the new agency offers a platform to push such enterprises to consolidate and optimise their overall efficiency," SASAC said in a statement on its website.

Wang Yong, the head of SASAC, said Guoxin will only help to restructure state companies and will not serve as a state investment firm, contrary to local media reports.

SASAC, which will control Guoxin, did not state the number or type of firms that will fall under Guoxin's purview.

China has for years been working on cutting the number of state firms and turning around unprofitable ones.

Under SASAC's aegis, the number of state companies has fallen to 125, from 196 in the last seven years, and SASAC will like to further cut the number to under 100 this year.

But after years of restructuring, the pace of reform has slowed, in part due to tension between executives in companies that are being merged.

The creation of Guoxin, which was discussed over the past year, is widely seen as a move to reinvigorate the consolidation drive.

Li Rongrong, former head of SASAC, has said both private and foreign investors will be allowed to participate in the consolidation process. - Reuters

Euro hit by ratings warnings; stocks gain

LONDON: The euro slumped to a lifetime low versus the Swiss franc on Wednesday, Dec 22 following credit ratings warnings on Portugal and Greece but European shares hit a fresh 27-month high on growing optimism that the region's economic recovery will continue next year.

The oil price topped $90 a barrel as a cold snap continued to wreak havoc in parts of Europe and on a drop in U.S. inventories while Wall Street was primed for a slightly weaker start, after climbing the previous day.

A warning from Moody's on Tuesday that it may cut Portugal's rating and an announcement from Fitch that it could downgrade Greece reminded investors that euro zone debt problems were far from over and continued to spur selling in the euro.

The single currency fell to 1.2493 Swiss francs, its weakest since its launch in 1999. However, it gained some respite against a broadly lower dollar on a Portuguese newspaper reported that China was ready to buy 4 to 5 billion euros of Portuguese sovereign debt.

Beijing offered no comment on the report, which failed to convince investors in the bond market as peripheral euro zone bonds remained under pressure with markets wanting more information on how European officials will deal with fiscal issues in the future.

"There's been no clarity on what European Union leaders will do to deal with the debt crisis," said Investec economist Philip Shaw.

"That uncertainty, coupled with the threat of downgrades to various peripheral countries has led to more spread widening and a weaker euro."

Global stocks measured by the MSCI All-Country World Index approached a 26-month high hit last month.

Europe's FTSEurofirst 300 index rose to 1,147.82, its highest intraday level since September 2008 but moves were exaggerated by thin pre-holiday trade.

The index was boosted by a near 9 percent surge in the share price of UK software company ARM Holdings, which supplies processors for Microsoft, on reports the software giant is working on a new version of its operating system.

Mining shares suffered from a fall in metals prices, but analysts said shares would remain supported through year end.

"Investors will be happy to see the market close off the year with a decent gain," said Richard Jeffrey chief investment officer at Cazenove Capital Management. "There's a lot of macro information today that may influence people's thinking on 2011."

In Tokyo, the Nikkei average dipped 0.2 percent, backing away from a seven-month intraday high hit earlier in the day after downbeat comments on the economy by Prime Minister Naoto Kan. Hong Kong's Hang Seng Index edged up 0.2 percent, helped by gains in property developers.

''

GOLD UP AS SAFE HAVEN

Reports that China is interested in buying Portuguese debt highlighted the currency market's focus on any possible move by China to diversify its massive currency reserves out of dollars and into other currencies, including the euro.

This is seen as a reason to sell the dollar against other currencies, although the move is expected to take place over a very long period.

The dollar index dipped 0.36 percent.

The newspaper report offered no relief for Portuguese bonds with 10-year yields rising 10 basis points to 6.80 percent on persistent concerns about Portugal's debt levels and fears it may be forced to follow Greece and Ireland and seek a bailout.

Yield premiums of periphery euro zone bonds over Bunds have been trending higher with the 10-year Portuguese spread widening around 60 basis points since the start of the month.

Analysts expect the euro and bonds issued by euro zone countries with ongoing debt problems to remain under pressure from a steady drip of grim ratings news.

Many argue that markets were already pricing even more gloom for the euro zone's weaker members -- Greece, Portugal, Spain, Ireland and Belgium -- and that ratings agencies were merely playing catch-up.

Debt and fiscal issues have plagued the euro all year, but European stocks have largely brushed off such issues as investors have put their money to work in equities on the view that the global economy will continue to grow in 2011.

Warnings from credit ratings on euro zone debt helped boost the appeal of gold as a safe asset and the gold price firmed to $1,388.65 an ounce on Wednesday, building on three straight sessions of gains.

Copper prices dipped to $9,365 on the London Metal Exchange after punching a record high of $9,392 on Tuesday.

Oil prices rose around half a percent on the day to $90.30 per barrel, boosted by unusually cold weather in parts of the northern hemisphere and after American Petroleum Institute data released late on Tuesday showed a large 5.8 million barrel decline in weekly crude stocks, surpassing analyst expectations. - Reuters